How To Qualify For FHA Loan in Garden Grove California (Orange County)
Looking for an FHA Loan in Garden Grove California?
FHA loans have been a flexible home loan program that’s been around since the 1930’s and is insured by the Federal Housing Administration (FHA). Popular with first-time home-buyers, FHA loans require lower minimum credit scores and down payments than many commonplace loans.
How Does an FHA Loan Work?
Borrowers can qualify for an FHA loan with a down payment as little as 3.5% for a credit score of 580 or higher. The borrower’s credit score can be between 500 – 579 if a 10% down payment is made. It’s significant to remember though, that the lower the credit rating, the higher the interest borrowers will receive. Something also worth noting is that the FHA loan limits affect your FHA mortgage insurance – its just part of the FHA loan qualifications.
The FHA program was created in response to the rise of foreclosures and defaults that happened in 1930s; to provide mortgage lenders with adequate insurance; and to help grow the housing market by making mortgages much more accessible and attainable for consumers with not so great credit or a low down payment due to FHA mortgage limits in Garden Grove, California. Essentially, the federal government insures loans for FHA-approved mortgage companies in order to reduce their risk of loss if a borrower defaults on their home loan payments.
Because of that insurance, lenders can, and do, offer FHA home loans at beneficial rates and with less stringent and more flexible qualification requirements. The FHA is an agency within the U.S. Department of Housing and Urban Development.
(Or call 213-474-7389 to ask a local lender anything!)
Benefits of FHA Loans: Low Down Payments and Less Strict Credit Score Requirements
Typically an FHA loan in Garden Grove is one of the easiest types of mortgage loans to qualify for because it requires a low down payment and you can have less-than-perfect credit. For FHA loans, down payment of 3.5 percent is required for maximum financing. Borrowers with credit scores as low as 500 can qualify for an FHA loan.
Borrowers who cannot afford a 20 percent down payment, have a lower credit score, or can’t get approved for private mortgage insurance should look into whether an FHA loan is the popular option for their personal circumstances.
Another advantage of an FHA home loan is that it’s an assumable loan which means if you want to sell your home, the buyer can “assume” the loan you have. People who have low or bad credit, have undergone a bankruptcy or have been foreclosed upon may be able to still qualify for an FHA loan.
FHA Allows a 3.5% Down-Payment
For today’s home buyers, there are only a few mortgage options which allow for down-payments of five percent or less for residents of Orange County. The FHA is one of them.
With an FHA mortgage, you can make a down-payment as small as 3.5%. This benefits home buyers who don’t have a lot of money saved up for down-payment; and, home buyers who would rather save money for moving costs, emergency funds, or other needs.
FHA Allows 100% Gift Funds
The FHA is aggressive with respect to gifts for down-payment. Very few mortgage loan programs will make it possible for your entire down-payment for a home to come from a gift. The FHA will.
Via the FHA, your entire 3.5% down-payment can be a gift from parents or another family member, an employer, an approved charitable group, or a government home-buyer program. If you’re using a down-payment gift, though, you’ll need to follow the process.
The FHA Hybrid provides for an initial fixed interest rate for a period of three or five years, and then readjusts annually after the initial fixed period. The 3/1 and 5/1 FHA Hybrid products allow up to a 1% annual interest rate adjustment after the initial fixed interest rate period, and a 5% interest rate cap over the life of the loan. The new payment after an adjustment will be calculated on the current principal balance at the time of the adjustment. This insures that the payment adjustment will be very little even on a worst case rate change.
About Garden Grove California
Garden Grove was founded by Alonzo Cook in 1874. A school district and Methodist church were organized that year. It remained a small rural crossroads and farming community until the arrival of the Pacific Electric Railroad in 1905. The rail connection helped the town prosper with the influx of tourists, visitors and eventually settlers, and it was noted for its crops of oranges, walnuts, chili peppers and later strawberries.
In 1933, much of the town’s central business district was destroyed by the Long Beach earthquake, and one person was killed at the high school. The post-World War II boom led to rapid development, and Garden Grove was incorporated as a city in 1956 with about 44,000 residents.
In 1956, Orange County Plaza (now The Promenade) was opened at Chapman and Brookhurst, and upon its expansion in 1959, it had 60 stores including a J. C. Penney, 2 variety stores and 2 supermarkets, and billed itself as both the largest and the first regional shopping center in Orange County.
Garden Grove has a rugged set of boundaries with many panhandles. The West Garden Grove neighborhood is west of Beach Boulevard and is largely separated from the rest of Garden Grove by the city of Stanton, with a small bridge of jurisdiction linking the two along Garden Grove Boulevard. A panhandle in the southern part of the town’s borders situated between Westminster’s Ward Street to the west and Santa Ana’s Euclid Street to the east creates a small border with the city of Fountain Valley. Other neighboring cities include Cypress and Anaheim to the north, Orange to the east, and the cities of Seal Beach and Los Alamitos to the west.
According to the United States Census Bureau, the city has a total area of 46.5 km (18.0 sq mi), 0.10% of which is water.
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Who Are FHA Loans For?
FHA loans are offered to low-income individuals who have credit scores as low as 500. Individuals with a credit score between 500-579 can obtain an FHA loan with a down payment of 10%; individuals with a credit score higher than 580 can get an FHA loan with as little as 3.5% down. The Federal Housing Administration does not lend the borrower the money to take on a home loan or to buy the house. Rather, the borrower pays a monthly or annual mortgage insurance premium to the FHA to insure the loan which the lending institution issues to him or her. In case of default, the lender’s financial risk is minimized since the FHA would step in to cover the payments.
Having no credit history is not a problem with an FHA loan for Orange County. Instead of your credit report, the lender may look at other payment-history records, such as utility and rent payments.
Even people who have gone through bankruptcy and foreclosure may still qualify for an FHA loan. However, the lower the credit score and the lower the down payment, the higher the interest rate.
(Or call 213-474-7389 to ask a local lender anything!)
Types of FHA Mortgage Loans
In addition to its popular FHA loan, the FHA likewise guarantees other loan programs used by private lending institutions. Here’s a look at each of them.
- FHA 203( k) loans – These FHA loans help property buyers purchase a home– and renovate it– all with a single home loan. Homeowners can also utilize the program to re-finance their existing home mortgage and include the cost of remodeling projects into the new loan. FHA 203( k) loans been available in 2 types:
- The minimal 203( k) has a simpler application process, and the repair work or improvements should total $35,000 or less.
- The basic 203( k) requires additional documents and applies to enhancements costing more than $5,000, but the total worth of the home must still fall within the FHA home mortgage limit for the area.
- House Equity Conversion Mortgage, or HECM – A HECM is a popular kind of reverse home loan and is also guaranteed by the FHA. A HECM permits older homeowners (aged 62 and up) with considerable equity or those who own their houses outright to withdraw a part of their house’s equity. The amount that will be offered for withdrawal varies by customer and depends upon the age of the youngest debtor or eligible non-borrowing partner, existing rate of interest and the lower of the home’s assessed value or the HECM FHA home mortgage limit or sales price.
- FHA Energy Efficient Mortgage (EEM) program – Energy effective home mortgages backed by the FHA enable property buyers to acquire houses that are already energy effective, such as EnergyStar-certified buildings. Or they can be used to purchase and renovate older houses with energy-efficient, or “green,” updates and roll the expenses of the upgrades into the loan without a larger deposit.
- FHA Section 245( a) loan – Also known as the Graduated Payment Mortgage, this program is tailored at debtors whose incomes will increase gradually. You begin with smaller sized month-to-month payments that gradually go up. Five particular plans are offered: 3 strategies that allow 5 years of increasing payments at 2.5 percent, 5 percent and 7.5 percent every year. 2 other plans set payment boosts over 10 years at 2 percent and 3 percent annually.
(Or call 213-474-7389 to ask a local lender anything!)
FHA Loan Limits for 2023
For 2019, the floor limitation for FHA loans in the majority of the country is $314,827, up from $294,515 in 2018. For high-cost locations, the ceiling is $726,525, up from $679,650 a year back. These limitations are described as “ceilings” and “floorings” that FHA will insure. FHA updates restrict quantities each year in response to changing house rates.
FHA is required by law to change its quantities based on the loan limitations set by the Federal Housing Finance Agency, or FHFA, for standard home loans ensured or owned by Fannie Mae and Freddie Mac. Ceiling and floor limits vary according to the cost of living in a certain area, and can be various from one county to the next. Areas with a greater cost of living will have higher limitations, and vice versa. Unique exceptions are produced real estate in Alaska, Hawaii, Guam and the Virgin Islands, where home construction is more expensive.
FHA Loan Relief
Loan servicers can offer some flexibility on FHA loan requirements to those who have suffered a serious financial hardship or are struggling to make their payments.
That relief might be in the form of a momentary period of forbearance, a loan adjustment that would reduce the interest rate, extend the repayment period, or defer part of the loan balance at no interest.
The FHA Hybrid Adjustable Rate
FHA administers a number of programs, based on Section 203(b), that have special features. One of these programs, Section 251, insures adjustable rate mortgages (ARMs) which, particularly during periods when interest rates are low, enable borrowers to obtain mortgage financing that is more affordable by virtue of its lower initial interest rate. This interest rate is adjusted annually, based on market indices approved by FHA, and thus may increase or decrease over the term of the loan. In 2006 FHA received approval to allow hybrid ARMs, in which the interest is fixed for the first 3 or 5 years, and is then adjusted annually according to market conditions and indices.
How do you Qualify for an FHA Loan in Garden Grove CA?
The FHA makes it relatively simple to qualify for a loan. Again, the government guarantees the loan, so mortgage companies are more willing to approve mortgage loans. However, mortgage companies can (and do) set standards that may be stricter than FHA requirements. If you’re having trouble with one FHA approved lender near Garden Grove CA, you might have better luck with shopping around for a better option.
Note: you never know until you submit an app. Even if you think you won’t qualify after reading this page, talk with an FHA approved lender in Garden Grove to find out for sure.
Income limits: there are none. You’ll need enough to show that you can repay the loan but these loans are geared towards lower income applicants. If you’re fortunate enough to have a high income, you aren’t disqualified like you might be with certain first-time home buyer programs.
FHA Closing Costs
While FHA defines which closing costs are allowable as charges to the borrower, the specific costs and amounts that are deemed reasonable and customary are determined by each local FHA office.
FHA Debt Ratios
In order to prevent home-buyers from getting into a home they cannot afford, FHA requirements have been set in place requiring borrowers and/or their spouse to qualify according to set debt to income ratios.
FHA Credit Issues
An FHA loan applicant’s past credit performance that shows good credit history and a solid track record of timely payments will likely be eligible for the home loan.
How to Find FHA Lenders
Debtors get their home loans from FHA-approved lenders in Garden Grove rather than the FHA itself, which just insures the loans. FHA-approved loan providers can have various rates and expenses, even for the same loan.
FHA loans are offered through many sources– from the greatest banks and credit unions to community banks and independent home loan lenders. Costs, services and underwriting standards vary amongst lenders or mortgage brokers, so it’s essential to look around.
Learn more about how to discover low FHA mortgage lending institution.
